Monthly Archives: May 2011

On Monday Pound/Dollar also traded quietly and within 65 pip range, in line with the positive Interbank sentiment at nearly +5%. The Cable depreciated from 1.6516 to 1.6449 yesterday, closing the day at 1.6473. Today the British Pound resumed climbing, rising up to 1.6548. On the 1 hour chart the upward channel is intact, while on the 3 hour chart the new upward channel looks good. First resistance is today’s peak at 1.6548. Break above it should extend the bullish movement further towards 1.6669. The nearest support is yesterday’s bottom and level at 1.6449. Going bellow it should extend British Pound‘s reduction further down towards next downward objective 1.6329. There are no major economic events for UK today. Quotes are moving just above the 20 and 50 EMA on the 1 hour chart, indicating slim bullish pressure. The value of the RSI indicator is positive and declining, MACD is positive and quiet too, while CCI has thinly crossed up the 100 line on the 1 hour chart, giving overall light long signals.

Already made +37 pips profit on GBP/USD today from the following signal:
5:31 GMT+1 Buy GBP/USD at 1.6510 SL 1.6484 TP 1.6570, exit sent at 7:59 GMT+1.
Today so far +166, yesterday +76, as shown in details at http://www.zifx.com/performance.php.

In an interview conducted by Amber Hestla with Trevor Neil, Managing Director, BETA Group, and course director of the upcoming Advanced Market Timing Experts Workshop 2011 (Singapore, June 20th-21st 2011, and Hong Kong, June 23rd-24th 2011, he describes his job and the unique characteristics of trading commodities, in particular, power, an area where more and more proprietary traders are focusing on.

How would you describe your job?

I am a fund manager and use my long market experience to offer market timing skills courses for institutional clients. I have a prestigious list of intuitional clients from all over the world. I manage a small £14 million fund. This is a closed fund and includes my own money. This started in July 2010 and has done well so far, ahead of its benchmark. I have managed hedge funds twice previously in my career.

I enjoy the training side of my work very much. Most of my seminars are in-house for dealers, fund managers, prop traders or analysts within banks, hedge funds and other institutions. I also run a few open seminars but these are aimed at an institutional audience. The seminars are popular and successful with desk managers and HR departments and allow me to travel extensively. Last year I worked in companies in China, Singapore, Australia, several in Eastern Europe and the UAE. Lots of work in London too, of course. We also run consultancy and mentoring services for selected clients.

What led you to look at the particular markets you specialize in as opposed to another tradable?

I started trading soft commodities on the floor of exchange in London. When the LIFFE market opened in London, many of us commodities traders switched to financial futures. Since then I have traded forex, equities, and derivatives over the last 30 years. But there is always something new and exciting in this business. I have recently been working extensively with those who trade Power (electricity). This is very interesting and the market is developing fast in Europe. It is different (it is almost impossible to store) and so it is valuable but disappears. When it rains you get more than you need. It is hard to control supply. Very different to other commodities. But it charts well and there is a growing number of prop traders involved in the markets.

Tom DeMark is adamant that subjective methods used in technical analysis cannot be trusted. When technical analysts cannot agree amongst themselves how to draw them, how can they be tested and how can be people be confident in using them? Perhaps the most subjective of all technical analysis methods is Elliott Wave analysis. There is a joke amongst technical analysts – bring together five Elliott wave analysts and you will get ten views on the markets. Yet all these analysts use the same technique with the same rules.

Tom has distilled this technique into a strict set of rules and measurements, so
strict that a computer can calculate them and display them, marking up the wave
counts according to defined rules. With his rules, everyone sees the same thing and makes the same correct count (if you agree with his rules). Elliott wave is now objective and mechanical – This is Tom DeMark’s D-Wave.

D Wave constructs Elliott cycles with user defined wave counts. The trend cycles develop with five impulse waves followed by a counter trend pattern of three corrective waves. The recommended D Wave settings suggest the waves 1, 3, 5 will become increasingly more significant in the development of the overall trend. The wave 1, 3, 5, and B counts require that the user specified price (high, true high, close) must be higher than the previous ‘N’ number of bars: the 2, 4, A, and C counts require that the specified price (low, true low, close) must be lower than the previous ‘N’ number of bars in an upward trend.

Conversely, wave 1, 3, 5, and B counts require that the user specified price (low, true low, close) must be lower than the previous ‘N’ number of bars, while the 2, 4, A, and C require that the specified price (high, true high, close) must be higher than the previous ‘N’ number of bars in a downward trend. D-Wave uses patterns that are defined by a series of Fibonacci highs and lows. This approach makes a D-Wave objective, e.g. Wave 1 could be identified as an 8 bar high, a
high higher than all previous 7 bars’ highs. The succeeding waves 2, 3, 4, and 5, as well as the correction waves, use Fibonacci numbers.

Oil may test $106 a barrel for the first time in three weeks if it breaks through technical resistance at its 100-day moving average, according to technical analysis from Blue Ocean Brokerage LLC.

Crude has traded in a range of $95 to $102 after settling below the 100-day average on May 11. A breach would position the July contract to rise near $106, a price that corresponds with both the 50-day moving average and the 76.4 percent retracement level on a Fibonacci study, said Carl Larry, Blue Ocean’s New York-based director of energy derivatives and research.

“We’re definitely targeting the 50-day moving average, which is around $106, as we see new money come in” at the beginning of June, Larry said. The 50-day average is at $106.17 and the 76.4 percent Fibonacci level is at $106.08.

Crude oil for July delivery gained 36 cents, or 0.4 percent, to settle at $100.59 a barrel May 27 on the New York Mercantile Exchange. U.S. financial markets were closed yesterday for the Memorial Day holiday. The contract edged up 0.5 percent last week.

If oil fails to breach the 100-day average this week, it’s likely to test support at the 50 percent Fibonacci level, or $95.79, Larry said. Below that, it will look to the 200-day moving average at $93.89, he said.

Why go to the effort to gain a qualification in technical analysis. A good reason alone is to learn it to a level of recognized confidence. Many people take the courses associated with qualifications without taking the exams. They are not in the industry and do not need the recognition of a qualification. Some also like the social networking side of working with people who are also learning the skill.
The biggest motivation to go to the effort of preparing and studying for the exams is to receive recognition amongst their peers as a competent technical analyst. Being a good technical analyst is a skill. It is not a science. You have probably passed your driving test. This does not mean you are a good driver. It means you have exceeded the minimum competence required to call yourself a driver. Others, including the police, recognize you as a competent driver. If you are asked if you can drive, you can answer truthfully, yes. Pressed further you may be able to say you have driven for 20 years without an accident. That makes you a good driver. So it is with technical analysis, you can work and pass one of the exams and become qualified as a technical analyst. Others will recognize you as a technical analyst. In your job you can say without embarrassment you know about technical analysis. But the qualification will not necessarily make you a profitable trader or accurate analyst. That comes later when you have added skill to your knowledge.

There are a number of routes to becoming a qualified technical analyst. We look here at their differences and their costs. There are two organizations which test in technical analysis the Market Technicians Association, the International Federation of Technical Analysis. We look at both of these exams in details and the organizations themselves. We hope this will encourage you to decide which route you go to become a qualified professional technical analyst. The important thing is though, do become one. It‟s worth it.

The MTA, a not-for-profit organization, confers the qualification Chartered Market Technician (CMT). It is awarded for proficiency in charting and technical analysis on competition of their program and on passing their exams. The designation is well-recognized and respected and is a confirmation of competence in technical analysis.
The MTA was started in 1973 and was initially a member of IFTA but broke away some years ago. It is based in New York and was formed by Ralph Acampora, John brooks and John Greeley. There are nearly 4,000 members in more than 74 countries. The MTA has branches called Chapters. There are 42 Chapters many of them in the US but increasingly over the rest of the world. There are currently more than 1,000 CMTs, the first one awarded in 1989. The MTA works hard to expand its contacts with universities and the regulators. The CMT qualification counts as a credit towards the SEC Series 86 qualification required for analysts.

A series of long-term charts suggests to me that we are getting ready for a Gold stock explosion higher that should begin before the summer is over. I am biased due to being rabidly bullish on Gold stocks right now, both intellectually and financially. Please take the following technical analysis smorgasbord with a grain of salt given my greedy dreams of speculative riches, which clearly bias my perspective.

Technical analysis should be objective, but the reality is that one person’s bullish chart is another’s bearish warning chart. This is what makes markets and why it ain’t always easy to make money as a trader. In any case, I believe we are on the cusp of a major move higher in Gold stocks as a sector.

I think the bottom in Gold stocks will roughly correspond with a cyclical top in general stock market indices, a la 2001-2003, 2007-early 2008 and 1973-1974. Many Gold stock investors equate general equity bear markets with Gold stocks getting slammed due to the 2008 fall crash fiasco that dragged down everything except the U.S. Dollar. Funny how memories are not only selective but also favor recent history over older history.

The reason I don’t care is because I think Gold stocks are going to rocket higher and more money can be made going long Gold stocks than going short the market, at least for the first 6 months or more of the looming cyclical stock bear market. And, as any seasoned Gold stock investor should know, Gold stocks can move awful fast – a gain of 100% or more in the Gold stock sector in 6 months is not a pie-in-the-sky proposition.

Anyhoo, onto my tea leaf tools. Here are some charts that I think are screaming for bulls to buy on the next dip. The last dip was a great buying opportunity and the next low may or may not be a lower low, but I think we’ll get another significant pull-back in general Gold stock indices.

At 0900 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 1,135.55 points, adding to the previous session’s gains.

German utilities took a beating, with RWE down 2.3 percent and E.ON down 1.6 percent, while French nuclear group Areva dropped 4.6 percent.

The sector sharply dropped last March when a massive earthquake and tsunami hit Japan and sparked a nuclear crisis.

RWE has lost 17 percent since March 11, and E.ON is down 15 percent.

“We expect that the companies will have to adjust their guidances, including the dividend, for full-year 2011 and probably the years thereafter, because so far both companies assumed that the stopped nuclear power plants will be back online after the moratorium,” DZ Bank analyst Marc Nettelbeck said.

Despite the mixed technical picture for European stocks, Societe Generale’s cross asset research team suggests, as a trading idea, to go long on the Euro STOXX 50 index and short on LME aluminium.

“Hard commodities could suffer further if growth disappoints in Europe…Much of the bad news is already priced in for the European equity markets, and Euro STOXX dividend yield of 4.3 percent is supportive,” they wrote in a note.